What is a pro forma invoice?
By Tim White · Glossary · Last updated
A pro forma invoice is a preliminary bill a seller sends before delivering goods or services. It shows the expected items, prices and terms so the buyer can approve, budget or arrange payment. It isn't a demand for payment and shouldn't be booked as a bill. The final invoice follows when the order ships.
When you'll see one
Pro formas are common in international trade, where customs or a bank needs the figures before the goods move. You'll also see them when a supplier wants a deposit or prepayment before starting work.
How it differs from the final invoice
The layout is usually the same. The status isn't. The commercial invoice records a completed sale, and that's the document you book and pay against. Most pro formas say 'Pro forma' at the top. Some only say it in small print near the totals, so read before you enter it.
Common mistakes
Most errors come from treating the preview as the real thing:
- Booking it into accounts payable, so the cost lands twice when the final invoice arrives
- Paying in full when only a deposit was agreed
- Reclaiming VAT from its tax line. In most countries a pro forma isn't a valid tax document.
Common questions
Do I pay a pro forma invoice?
Usually not. You pay against the final invoice. Some sellers ask for prepayment based on the pro forma, in which case you book the payment as a deposit and apply it when the final invoice arrives.
What's the difference between a pro forma invoice and a quote?
A quote is a price offer. A pro forma is laid out like a real invoice, with quantities, terms and totals, and usually follows an agreed order.
Can you reclaim tax on a pro forma invoice?
No. Tax is reclaimed against the final commercial or tax invoice.
Sources
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